Why do big conglomerates buy media houses?

“We are not making any money, yes that’s true, in fact, it has been difficult for us to make our ends meet”, quoted Sujit Nayar, Managing editor of HWnews in a recent episode. 

Running a media business is not for the faint-hearted. It is an expensive business to run. The costs involved in the business are high. They have to spend considerable sums on gathering the news and hiring the best journalist. While the costs are huge, the revenue sources for media companies are just a few.

The core income for most media companies is the advertisement revenue. However, as a result of Covid-19 and its impact on the Indian economy, businesses are unwilling to advertise their products. With a looming recession and a pandemic, companies have tightened their advertisement budgets.

Also, businesses advertising on news channels also advertise on entertainment and sports channels. So very little of their marketing budget is left for news channels. Then the distributors take a large share of the ad revenue. Because of it, news channels are small and unprofitable. They are hit very hard when businesses cut their advertising budget. 

For example, NDTVs revenue went from Rs. 566 crores in 2016 to Rs. 396 crore in 2022. The company’s sales has grown at a CAGR of -4% in the last five years.

With high fixed costs and consumers that aren’t wiling to pay money to read news, these companies just bleed money. But even with such skewed financials, these companies attract promoters of giant conglomerates.

For instance, In 2013, Jeff Bezos acquired the Washington Post, and Bill Gates sponsors BBC, The Guardian, The Financial Times and The Daily Mail projects Telegraph,Al-Jazeera, and many more.

In India, Ambani acquired Network18, which owns channels like CNBC, CNN, News18 etc. Now we have Adani fighting the world to acquire NDTV.

The question is why are all big tycoons interested in media companies? Well, one reason could be to have a good brand image. Large conglomerates that own media houses exert control over them and dictate what comes out in the news. These companies generally use news companies to build a good brand image.

In his interview with Reuters, Nikhil Wagle, editor of IBN-Lokmat,(part of Network18 group) quoted ” Every day you can find some example of interference by Reliance - direct interference in news,” 

“They don’t send any mail. They give oral instructions. They give hints.” 

Second reason could be the government. Large conglomerates have to work closely with the government. They have to be really polite and lick their boots in order to obtain the licenses, permits, etc. Owning a media house and controlling what the media says about the government in power brings these tycoons closer to the government. 

A testament to it could be the recent hostile acquisition of stake in NDTV by Adani. In this case, profit motives are not driving the acquisition, but rather the desire to influence the only channel that criticizes the government. 

Most media houses are either owned by Ambani or indebted to him and would not dare speak against the government. In that environment, NDTV stood out, it spoke against the government on various issues like the mishandling of COVID19 by the government and farmers' protests. 

Their focus was not on sensationalism, the loud performances, or the Hindu-Muslim issues that other channels were exploiting for eyeballs but rather on the core issues in the economy, and due to that, the company lost viewers and advertising revenue. Also, Adani is quite close to the current government. Adani has been a big supporter of Modi since the 2000s, and the success of both Gujratis has mirrored each other.

Thus, Adani's acquisition of NDTV may not make economic sense, but it may bring him closer to the government.